Analysis of the President's FY 2013 Budget

On Monday, the White House released its FY 2013 budget. Our major findings include:

Debt held by the public would rise from 68 percent of GDP in 2011 to 74 percent in 2012 and 77 percent in 2013, before declining to over 76 percent in 2018 and stabilizing at that level through 2022. We estimate that under CBO's more pessimistic economic assumptions, debt would reach nearly 80 percent of GDP in 2022.

The budget proposes $2.1 trillion in new gross revenues through 2022 relative to current policy, along with $360 billion in health care reductions, and $160 billion in other mandatory reductions.

The President's budget also proposes a number of deficit-increasing measures, including a $350 billion jobs package, nearly $370 billion in tax reductions, and nearly $270 billion in increased spending -- mostly for education and infrastructure.

When combined with the Budget Control Act (BCA) discretionary caps, the drawdown of the wars in Iraq and Afghanistan, and the recovering economy, these proposals would lift revenue from 15.8 percent of GDP in 2012 to 20.1 percent in 2022 while reducing spending from 24.3 percent of GDP in 2012 to 22.8 percent by 2022.

Under the budget, deficits would fall from 8.5 percent of GDP in 2012 to 5.5 percent in 2013, 3.0 percent in 2017, and roughly 2.8 percent annually between 2018 and 2022.

The President's budget takes an important step by laying out a number of policies to stabilize the debt. Given how serious the nation's fiscal challenges are, however, the President should have laid out a specific comprehensive plan to return the nation to a sustainable fiscal path, rather than just a first step.